I've written about Brazil pre-Lula and post-Lula and spent the last five years covering all aspects of the country for Dow Jones, Wall Street Journal and Barron's. Meanwhile, for an undetermined amount of time, and with a little help from my friends, I will be parachuting primarily into Brazil, Russia, India and China. But will also be on the look out for interesting business stories and investing ideas throughout the emerging markets.

Brazil's World Cup Ups Inflation

Inflation in Brazil is like walking in the swampy Pantanal without bug spray in the middle of the summer. It’s there. Buzzing. The pests do not go away no matter how bad you want them to. The Central Bank can throw higher interest rates at it, hoping to cut spending, but inflation still manages to surprise. It surprised again on Wednesday.

Higher-than-expected tourism prices, fueled by the run up to the ongoing FIFA Word Cup, led the upside surprise of the 0.47% monthly increase in the June IPCA-15 inflation index, which measures the first two weeks of the month. Despite the food price decline, Marcelo Salomon, an economist with BarclaysBarclays Capital in New York, is raising his June total inflation forecast to 0.35%.

Compared to the same period last year, IPCA-15 accelerated to 6.41% from 6.31%.

Rio’s Ipanema Beach in the early morning hours. High prices for hotels and travel tickets pushed Brazil’s inflation rate for the first two weeks of June to higher than expected levels. (Photo by Mike Vondran)

“The surprise to our forecast came from the personal expenditures group, with stronger tourism-related price increases preceding the World Cup,” Solomon wrote in a note to clients today.

It is noteworthy that food & beverages group inflation did slow as expected, reaching 0.21% month from 0.88% in the previous release. That’s not so great for Brazilian beverage giant Ambev. The stock everyone thought would go ballistic from FIFA is down 6.5% in the last month and 5.85% year-to-date, underperforming the MSCIMSCI Brazil.

“You would think that a beer company would have performed better, but it has not,” said Nicolas Jaquier, an economist with Standard Life Investments in the U.K.

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Similar to other countries affected by the global economic crisis, Brazil’s economy is stagnant, with rising unemployment and soaring commodity prices. The fact that it is the site of the 2014 World Cup doesn’t mean everything else will change for the economy. If anything, the surge of tourist has even contributed to the rising cost of food and beverages. But for its tourism industry, Brazil may be riding the crest now.